What is Activity Cost?

The cost tab provides a method of adding cost to each entity as it moves through the process. The cost tab also provides a means for classifying how time is accounted at the activity (VA, NVA, BVA). Other costs may be added by the usage of resources (see Resource Costs), routings (see Entity Routing Costs) and the initial costs of an entity (see Entity Costs).

The identification of cost is optional and has no effect on the behavior of the model.

Properties dialog activity cost ProcessModel software

Hourly cost Cost added to each entity per hour of time spent performing this activity. Cost values may range from negative 1,000,000 to 1,000,000. Idle time, while waiting for resources, is not counted. This cost is added to the pre-defined Cost attribute of the entity being processed.

Activity cost Cost added to each entity completing this activity. This cost is added to the pre-defined Cost attribute of the entity being processed.

If costs are entered as a negative number and final completed production is entered as a positive then a net revenue number can be obtained from the Summary Report. See “Output Summary Reports 

 Resource cost must be a number. Expressions, attributes, variables, or scenario parameters are not allowed.

To learn more about costs, see ProcessModel and Activity-based Costing .

VA Time How the time for each entity completing this activity is categorized. As an entity is processed its total time in the system will be divided into three categories Value Added, Non-Value Added and Book Value Added. This allows an accurate accounting of how much of the total process time adds value from

  • VA — Value Added – Time for those work elements that transform the product or service in a way the customer is willing to pay for.
    Value adding (VA Time) activities are those which must be done in order to meet the customer’s requirements. Without these activities, the customer wouldn’t get their desired output. To be a value added action the action must meet all three of the following criteria:
    1. Necessary to meet customer requirements.
    2. Required for or assists in the production of the product or service.
    3. Represents an output that the customer is willing to pay for.

      Value added time is calculated by summing the entity VA Time. If the VA type is set to BVA Time (Business Value Added) the time in the activity will be associated to another category. Otherwise all entity time is calculated as NVA Time (non value adding).

      It’s not always easy to identify which of the three types an activity is. If you don’t understand customer requirements, spotting Real VA will be difficult. Book/Business Value Added is almost always the most contentious to identify. People will tell you “but we have to do that”, usually for reasons lost in time. Perhaps there was once an audit requirement to carry out a check at a step in the process, but does it apply now? Maybe there was a National Standard that stated an activity had to be done, but is it still required? The biggest challenges, in most public sector processes will be: “why are there so many checks, inspections and approvals required?” What value do they really add and can they be eliminated?
  • NVA — Non-value Added – Adding Time for those work elements that are not used to transform the product or service in a way the customer is willing to pay for.

    Non Value Added activities are waste! They don’t contribute to the customer’s requirements and don’t need to be performed. Non value added time is characterized by the following:
    1. If eliminated, would not impact the product or service to the customer.
    2. Creates waste, extra time, rework.
    3. Is performed because of inefficiency elsewhere within the process.
    4. Represents a equivalent effort to other activities or adds unneeded steps to the process.

      Non value added time is applied to an entity when an entity is in the capacity of an activity AND the VA Type is set to NVA Time.

      NVA time is also accumulated when an entity:
      • Travels on a route
      • Sits in storage
      • Waits in an input queue
      • Is held by a Wait Until statement

        NVA Time is calculated by summing the time an entity spends in the above 5 identified areas. Activities are classified from the customer’s point of view meaning that the value of each action in the process is determined by whether it adds value from the customer perspective—value added—or does not add value from the customer perspective—non-value added. Steps that are required but irrelevant from the customer perspective represent a final classification—business-value added.
  • BVA — Book-value Added – Time for those work elements that are required to stay in business. Often government required steps will be classified as BVA.

The time that an entity spends in the Input queue, Output queue or in route is Non-Value Added.

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